See
also <GENERAL_REQUIREMENTS>
|
1
Valuation of goods (Section 14 to 19 of Customs Act, 1962) 2. New
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 |
1 Valuation of goods (Section 14 to 19 of Customs Act, 1962)
Valuation of goods (Section 14)
(1) For
the purposes of the Customs Tariff Act, 1975 (51 of 1975), or any other law for
the time being in force, the value of the imported goods and export goods shall
be the transaction value of such goods, that is to say, the price actually paid
or payable for the goods when sold for export to India for delivery at the time
and place of importation, or as the case may be, for export from India for
delivery at the time and place of exportation, where the buyer and seller of
the goods are not related and price is the sole consideration for the sale
subject to such other conditions as may be specified in the rules made in this
behalf :
Provided
that such transaction value in the case of imported goods shall include, in
addition to the price as aforesaid, any amount paid or payable for costs and
services, including commissions and brokerage, engineering, design work,
royalties and licence fees, costs of transportation to the place of
importation, insurance, loading, unloading and handling charges to the extent
and in the manner specified in the rules made in this behalf:
Provided
further that the rules made in this behalf may provide for,-
(i) the circumstances
in which the buyer and the seller shall be deemed to be related;
(ii) the manner of
determination of value in respect of goods when there is no sale, or the buyer
and the seller are related, or price is not the sole consideration for the sale
or in any other case;
(iii) the manner of
acceptance or rejection of value declared by the importer or exporter, as the
case may be, where the proper officer has reason to doubt the truth or accuracy
of such value, and determination of value for the purposes of this section :
Provided
also that such price shall be calculated with reference to the rate of exchange
as in force on the date on which a bill of entry is presented under section 46,
or a shipping bill of export, as the case may be, is presented under section
50.
(2) Notwithstanding
anything contained in sub-section (1), if the Board is satisfied that it is
necessary or expedient so to do, it may, by notification in the Official
Gazette, fix tariff values for any class of imported goods or export goods,
having regard to the trend of value of such or like goods, and where any such
tariff values are fixed, the duty shall be chargeable with reference to such
tariff value.
Explanation. — For the purposes
of this section -
(a) “rate of exchange” means the rate of exchange -
(i) determined by the
Board, or
(ii) ascertained in
such manner as the Board may direct, for the conversion of Indian currency into
foreign currency or foreign currency into Indian currency;
(b) “foreign currency” and ‘‘Indian currency” have
the meanings respectively assigned to them in clause (m) and clause (q) of
section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
Date for determination of rate of duty and tariff valuation
of imported goods (Section 15)
(1) The rate of duty and tariff valuation, if any, applicable
to any imported goods, shall be the rate and valuation in force,-
(a) in the case of goods entered for home consumption under
section 46, on the date on which a bill of entry in respect of such goods is
presented under that section;
(b) in the case of goods cleared from a warehouse under
section 68, on the date on which a bill of entry for home consumption in
respect of such goods is presented under that section;
(c) in the case of any other goods on the date of payment of
duty:
Provided that if a bill of entry has been presented before
the date of entry inwards of the vessel or the arrival of the aircraft by which
the goods are imported, the bill of entry shall be deemed to have been
presented on the date of such entry inwards or the arrival, as the case may be.
(2) The provisions of this section shall not apply to
baggage and goods imported by post.
Date for determination of rate of duty and tariff valuation
of export goods (Section 16)
(1) The rate of duty and tariff valuation, if any,
applicable to any export goods, shall be the rate and valuation in force,-
(a) in the case of goods entered for export under section
50, on the date on which the proper officer makes an order permitting clearance
and loading of the goods for exportation under section 51;
(b) in the case of any other goods, on the date of payment
of duty.
(2) The provisions of this section shall not apply to
baggage and goods exported by post.
Assessment of duty (Section 17)
(1) After an importer has entered any imported goods under
section 46, or an exporter has entered any export goods under section 50 the
imported goods or the export goods, as the case may be, or such part thereof as
may be necessary may, without undue delay, be examined and tested by the proper
officer.
(2) After such examination and testing, the duty, if any,
leviable on such goods shall, save as otherwise provided in section 85, be
assessed.
(3) For the purposes of assessing duty under sub-section
(2), the proper officer may require the importer, exporter or any other person
to produce any contract, brokers note, policy insurance, catalogue or other
document whereby the duty leviable on the imported goods or export goods, as
the case may be, can be ascertained, and to furnish any information required
for such ascertainment which it is in his power to produce or furnish, and
thereupon the importer, exporter or such other person shall produce such
document and furnish such information.
(4) Notwithstanding anything in this section, imported goods
or export goods may, prior to the examination or testing thereof, be permitted
by the proper officer to be assessed to duty on the basis of the statements
made in the entry relating thereto and the documents produced and the
information furnished under sub-section (3); but if it is found subsequently on
examination or testing of the goods or otherwise that any statement in such
entry or document or any information so furnished is not true in respect of any
matter relevant to the assessment, the goods may, without prejudice to any
other action which may be taken under this Act, be re-assessed to duty.
(5) Where any assessment done under sub-section (2) is
contrary to the claim of the importer or exporter regarding valuation of goods,
classification, exemption or concessions of duty availed consequent to any
notification therefor under this Act, and in cases other than those where the
importer or the exporter, as the case may be, confirms his acceptance of the
said assessment in writing, the proper officer shall pass a speaking order
within fifteen days from the date of assessment of the bill of entry or the
shipping bill, as the case may be.
Provisional assessment of duty (Section 18)
(1) Notwithstanding anything contained in this Act but
without prejudice to the provisions contained in section 46-
(a) where the proper officer is satisfied that an importer
or exporter is unable to produce any document or furnish any information
necessary for the assessment of duty on the imported goods or the export goods,
as the case may be; or
(b) where the proper officer deems it necessary to subject
any imported goods or export goods to any chemical or other test for the
purpose of assessment of duty thereon; or
(c) where the importer or the exporter has produced all the
necessary documents and furnished full information for the assessment of duty
but the proper officer deems it necessary to make further enquiry for assessing
the duty, the proper officer may direct that the duty leviable on such goods
may, pending the production of such documents or furnishing of such information
or completion of such test or enquiry, be assessed provisionally if the
importer or the exporter, as the case may be, furnishes such security as the
proper officer deems fit for the payment of the deficiency, if any between the
duty finally assessed and the duty provisionally assessed.
(2) When the duty leviable on such goods is assessed finally
in accordance with the provisions of this Act, then-
(a) in the case of goods cleared for home consumption or
exportation the amount paid shall be adjusted against the duty finally assessed
and if the amount so paid falls short of, or is in excess of the duty finally
assessed, the importer or the exporter of the goods shall pay the deficiency or
be entitled to a refund, as the case may be;
(b) in the case of warehoused goods, the proper officer may,
where the duty finally assessed is in excess of the duty provisionally
assessed, require the importer to execute a bond, binding himself in a sum
equal to twice the amount of the excess duty
(3) The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment order under sub-section (2), at the rate fixed by the Central Government under section 28AB from the first day of the month in which the duty is provisionally assessed till the date of payment thereof.
(4) Subject the sub-section (5), if any refundable amount referred to in clause (a) of sub-section (2) is not refunded under that sub-section within three months from the date of assessment of duty finally, there shall be paid an interest on such unrefunded amount at such rate fixed by the Central Government under section 27A till the date of refund of such amount.
(5) The amount of duty refundable under sub-section (2) and the interest under sub-section (4), if any, shall, instead of being credited to the Fund, be paid to the importer or the exporter, as the case may be, if such amount is relatable to -
(a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal use;
(c) the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;
(d) the export duty as specified in section 26;
(e) drawback of duty payable under sections 74 and 75.]
Determination of duty where goods consist of articles liable
to different rates of duty (Section 19)
Except as otherwise provided in any law for the time being
in force, where goods consist of a set of articles, duty shall be calculated as
follows:-
(a) articles to duty with reference to quantity shall be
chargeable to that duty;
(b) articles liable to duty with reference to value shall,
if they are liable to duty at the same rate, be chargeable to duty at that
rate, and if they are liable to duty at different rates, be chargeable to duty
at the highest of such rates;
(c) articles not liable to duty shall be chargeable to duty
at the rate at which articles liable to duty with reference to value are liable
under clause (b):
Provided that-
(a) accessories of, and spare parts or maintenance and
repairing implements for any article which satisfies the conditions specified
in the rules made in this behalf shall be chargeable at the rate of duty as
that article;
(b) if the importer produces evidence to the satisfaction of
the proper officer regarding the value of any of the articles liable to
different rates of duty, such article shall be chargeable to duty separately at
the rate applicable to it.
2. New Customs Valuation (Determination of Value of
Imported Goods) Rules, 2007
Text of the Main Notification 94-Customs (Non-Tariff) dated 13
September 2007
The Valuation Rules have 13 Sections as follows:
1. Short
title, commencement and application
2. Definitions
3. Determination
of the method of valuation
4. Transaction
value of identical goods
5. Transaction
value of similar goods
6. Determination
of value where value can not be determined under rules 3, 4 and 5
7. Deductive
value
8. Computed
value
9. Residual
method
10. Cost
and services
11. Declaration
by the importer
12. Rejection
of declared value
13. Interpretative
notes
The Schedule - Interpretative Notes
In
exercise of the powers conferred by section 156 read with section 14 of the Customs
Act, 1962 (52 of 1962), and in supersession of the Customs Valuation
(Determination of Price of Imported goods) Rules, 1988 except as
respects things done or omitted to be done before such supersession, the
Central Government hereby makes the following rules, namely: -
(1)These rules may be
called the Customs Valuation (Determination of Value of Imported Goods) Rules,
2007.
(2) They shall come into force on the 10th
day of October, 2007.
(3) They shall apply to imported goods.
(1) In these rules,
unless the context otherwise requires, -
(a) “computed value”
means the value of imported goods determined in accordance with rule 8.
(b) “deductive value”
means the value determined in accordance with rule 7.
(c) “goods of the
same class or kind”, means imported goods that are within a group or range of
imported goods produced by a particular industry or industrial sector and
includes identical goods or similar goods;
(d) “identical goods”
means imported goods -
(i) which are same
in all respects, including physical characteristics, quality and reputation as
the goods being valued except for minor differences in appearance that do not
affect the value of the goods;
(ii) produced in the
country in which the goods being valued were produced; and
(iii) produced by the
same person who produced the goods, or where no such goods are available, goods
produced by a different person, but shall not include imported goods where
engineering, development work, art work, design work, plan or sketch undertaken
in India were completed directly or indirectly by the buyer on these imported
goods free of charge or at a reduced cost for use in connec-tion with the
production and sale for export of these imported goods;
(e) “produced”
includes grown, manufac-tured and mined
(f) “similar goods”
means imported goods -
(i) which although
not alike in all respects, have like characteristics and like component
materials which enable them to perform the same functions and to be
commercially interchangeable with the goods being valued having regard to the
quality, reputation and the existence of trade mark;
(ii) produced in the country in which the goods
being valued were produced; and
(iii) produced by the
same person who produced the goods being valued, or where no such goods are
available, goods produced by a different person, but shall not include imported
goods where engineering, development work, art work, design work, plan or
sketch undertaken in India were completed directly or indirectly by the buyer
on these imported goods free of charge or at a reduced cost for use in
connection with the production and sale for export of these imported goods;
(g) “transaction
value” means the value referred to in sub-section (1) of section 14 of the
Customs Act, 1962;
(2) For the purpose of these rules, persons shall
be deemed to be “related” only if -
(i) they are
officers or directors of one another’s businesses;
(ii) they are legally
recognised partners in business;
(iii) they are
employer and employee;
(iv) any person
directly or indirectly owns, controls or holds five per cent or more of the
outstanding voting stock or shares of both of them;
(v) one of them
directly or indirectly controls the other;
(vi) both of them are
directly or indirectly controlled by a third person;
(vii) together they
directly or indirectly control a third person; or
(viii) they are members
of the same family.
Explanation
I. -
The term “person” also includes legal persons.
Explanation
II.
- Persons who are associated in the business of one another in that one is the
sole agent or sole distributor or sole concessionaire, howsoever described, of
the other shall be deemed to be related for the purpose of these rules, if they
fall within the criteria of this sub-rule.
(1) Subject to rule
12, the value of imported goods shall be the transaction value adjusted in
accordance with provisions of rule 10;
(2) Value of imported goods under sub-rule (1)
shall be accepted:
Provided that -
(a) there are no restrictions as to the disposition or use of
the goods by the buyer other than restrictions which –
(i) are imposed or
required by law or by the public authorities in India; or
(ii) limit the
geographical area in which the goods may be resold; or
(iii) do not
substantially affect the value of the goods;
(b) the sale or price
is not subject to some condition or consideration for which a value
cannot be determined in respect of the goods being valued;
(c) no part of the
proceeds of any subsequent resale, disposal or use of the goods by the buyer
will accrue directly or indirectly to the seller, unless an appropriate
adjustment can be made in accordance with the provisions of rule 10 of these rules;
and
(d) the buyer and
seller are not related, or where the buyer and seller are related, that
transaction value is acceptable for customs purposes under the provisions of
sub-rule (3) below.
(3) (a) Where
the buyer and seller are related, the transaction value shall be accepted
provided that the examination of the circumstances of the sale of the imported
goods indicate that the relationship did not influence the price.
(b) In a sale between
related persons, the transaction value shall be accepted, whenever the importer
demonstrates that the declared value of the goods being valued, closely
approximates to one of the following values ascertained at or about the same
time.
(i) the transaction
value of identical goods, or of similar goods, in sales to unrelated buyers in
India;
(ii) the deductive
value for identical goods or similar goods;
(iii) the computed
value for identical goods or similar goods:
Provided that in applying the values used for comparison, due
account shall be taken of demonstrated difference in commercial levels,
quantity levels, adjustments in accordance with the provisions of rule 10 and
cost incurred by the seller in sales in which he and the buyer are not related;
(c) substitute values
shall not be established under the provisions of clause (b) of this sub-rule.
(4) if the value cannot be determined under the
provisions of sub-rule (1), the value shall be determined by proceeding
sequentially through rule 4 to 9.
(1) (a)Subject to the provisions of rule 3, the
value of imported goods shall be the transaction value of identical goods sold
for export to India and imported at or about the same time as the goods being
valued;
Provided that such transaction value shall not be the value of
the goods provisionally assessed under section 18 of the Customs Act, 1962.
(b) In applying this
rule, the transaction value of identical goods in a sale at the same commercial
level and in substantially the same quantity as the goods being valued shall be
used to determine the value of imported goods.
(c) Where no sale
referred to in clause (b) of sub-rule (1), is found, the transaction value of
identical goods sold at a different commercial level or in different quantities
or both, adjusted to take account of the difference attributable to commercial
level or to the quantity or both, shall be used, provided that such adjustments
shall be made on the basis of demonstrated evidence which clearly establishes
the reasonableness and accuracy of the adjustments, whether such adjustment
leads to an increase or decrease in the value.
(2) Where the costs and charges referred to in
sub-rule (2) of rule 10 of these rules are included in the transaction value of
identical goods, an adjustment shall be made, if there are significant
differences in such costs and charges between the goods being valued and the
identical goods in question arising from differences in distances and means of
transport.
(3) In applying this rule, if more than one
transaction value of identical goods is found, the lowest such value shall be
used to determine the value of imported goods.
(1) Subject to the provisions of rule 3, the value
of imported goods shall be the transaction value of similar goods sold for
export to India and imported at or about the same time as the goods being
valued:
Provided that such transaction value shall not be the value
of the goods provisionally assessed under section 18 of the Customs Act, 1962.
(2) The provisions of clauses (b) and (c) of
sub-rule (1), sub-rule (2) and sub-rule (3), of rule 4 shall, mutatis
mutandis, also apply in respect of similar goods.
If the value of
imported goods cannot be determined under the provisions of rules 3, 4 and 5,
the value shall be determined under the provisions of rule 7 or, when the value
cannot be determined under that rule, under rule 8.
Provided that at the request of the importer, and with the
approval of the proper officer, the order of application of rules 7 and 8 shall
be reversed.
(1) Subject to the provisions of rule 3, if the
goods being valued or identical or similar imported goods are sold in India, in
the condition as imported at or about the time at which the declaration for
determination of value is presented, the value of imported goods shall be based
on the unit price at which the imported goods or identical or similar imported
goods are sold in the greatest aggregate quantity to persons who are not
related to the sellers in India, subject to the following deductions :
(i) either the
commission usually paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of imported
goods of the same class or kind;
(ii) the usual costs
of transport and insurance and associated costs incurred within India;
(iii) the customs
duties and other taxes payable in India by reason of importation or sale of the
goods.
(2) If neither the imported goods nor identical
nor similar imported goods are sold at or about the same time of importation of
the goods being valued, the value of imported goods shall, subject otherwise to
the provisions of sub-rule (1), be based on the unit price at which the
imported goods or identical or similar imported goods are sold in India, at the
earliest date after importation but before the expiry of ninety days after such
importation.
(3) (a) If
neither the imported goods nor identical nor similar imported goods are sold in
India in the condition as imported, then, the value shall be based on the unit
price at which the imported goods, after further processing, are sold in the
greatest aggregate quantity to persons who are not related to the seller in
India.
(b) In such
determination, due allowance shall be made for the value added by processing
and the deductions provided for in items (i) to (iii) of sub-rule (1).
Subject to the
provisions of rule 3, the value of imported goods shall be based on a computed
value, which shall consist of the sum of:-
(a) the cost or value
of materials and fabrication or other processing employed in producing the
imported goods;
(b) an amount for
profit and general expenses equal to that usually reflected in sales of goods
of the same class or kind as the goods being valued which are made by producers
in the country of exportation for export to India;
(c) the cost or value
of all other expenses under sub-rule (2) of rule 10.
(1) Subject to the
provisions of rule 3, where the value of imported goods cannot be determined
under the provisions of any of the preceding rules, the value shall be
determined using reasonable means consistent with the principles and general
provisions of these rules and on the basis of data available in India;
Provided that the value so determined shall not exceed the
price at which such or like goods are ordinarily sold or offered for sale for
delivery at the time and place of importation in the course of international
trade, when the seller or buyer has no interest in the business of other and
price is the sole consideration for the sale or offer for sale.
(2) No value shall be determined under the
provisions of’ this rule on the basis of -
(i) the selling price
in India of the goods produced in India;
(ii) a system which
provides for the acceptance for customs purposes of the highest of the two
alternative values;
(iii) the price of the
goods on the domestic market of the country of exportation;
(iv) the cost of
production other than computed values which have been determined for identical
or similar goods in accordance with the provisions of rule 8;
(v) the price of the
goods for the export to a country other than India;
(vi) minimum customs
values; or
(vii) arbitrary or
fictitious values.
(1) In determining
the transaction value, there shall be added to the price actually paid or
payable for the imported goods, —
(a) the following to
the extent they are incurred by the buyer but are not included in the price
actually paid or payable for the imported goods, namely:-
(i) commissions and
brokerage, except buying commissions;
(ii) the cost of
containers which are treated as being one for customs purposes with the goods
in question;
(iii) the cost of
packing whether for labour or materials;
(b) The value,
apportioned as appropriate, of the following goods and services where
supplied directly or indirectly by the buyer free of charge or at reduced cost
for use in connection with the production and sale for export of imported
goods, to the extent that such value has not been included in the price
actually paid or payable, namely:-
(i) materials,
components, parts and similar items incorporated in the imported goods;
(ii) tools, dies,
moulds and similar items used in the production of the imported goods;
(iii) materials
consumed in the production of the imported goods;
(iv) engineering,
development, art work, design work, and plans and sketches undertaken elsewhere
than in India and necessary for the production of the imported goods;
(c) royalties and
licence fees related to the imported goods that the buyer is required to pay,
directly or indirectly, as a condition of the sale of the goods being valued,
to the extent that such royalties and fees are not included in the price
actually paid or payable;
(d) The value of any
part of the proceeds of any subsequent resale, disposal or use of the imported
goods that accrues, directly or indirectly, to the seller;
(e) all other payments
actually made or to be made as a condition of sale of the imported goods, by
the buyer to the seller, or by the buyer to a third party to satisfy an
obligation of the seller to the extent that such payments are not included in
the price actually paid or payable.
Explanation.- Where
the royalty, licence fee or any other payment for a process, whether patented
or otherwise, is includible referred to in clauses (c) and (e), such charges
shall be added to the price actually paid or payable for the imported goods,
notwithstanding the fact that such goods may be subjected to the said process
after importation of such goods.
(2) For the purposes of sub-section (1) of
section 14 of the Customs Act, 1962 (52 of 1962) and these rules, the value of
the imported goods shall be the value of such goods, for delivery at the time
and place of importation and shall include –
(a) the cost of
transport of the imported goods to the place of importation;
(b) loading, unloading
and handling charges associated with the delivery of the imported goods at the
place of importation; and
(c) the cost of
insurance :
Provided that
–
(i) where the cost
of transport referred to in clause (a) is not ascertainable, such cost shall be
twenty per cent of the free on board value of the goods;
(ii) the charges
referred to in clause (b) shall be one per cent of the free on board value of
the goods plus the cost of transport referred to in clause (a) plus the cost of
insurance referred to in clause (c);
(iii) where the cost
referred to in clause (c) is not ascertainable, such cost shall be 1.125% of
free on board value of the goods;
Provided further
that
in the case of goods imported by air, where the cost referred to in clause (a)
is ascertainable, such cost shall not exceed twenty per cent of free on board
value of the goods:
Provided also
that where the free on board value of the goods is not ascertainable, the costs
referred to in clause (a) shall be twenty per cent of the free on board value
of the goods plus cost of insurance for clause (i) above and the cost referred
to in clause (c) shall be 1.125% of the free on board value of the goods plus
cost of transport for clause (iii).
Provided also
that
in case of goods imported by sea stuffed in a container for clearance at an
Inland Container Depot or Container Freight Station, the cost of freight
incurred in the movement of container from the port of entry to the Inland
Container Depot or Container Freight Station shall not be included in the cost
of transport referred to in clause (a).
Explanation.- The cost of
transport of the imported goods referred to in clause (a) includes the ship
demurrage charges on charted vessels, lighterage or barge charges.
(3) Additions to the price actually paid or
payable shall be made under this rule on the basis of objective and
quantifiable data.
(4) No addition shall be made to the price
actually paid or payable in determining the value of the imported goods except
as provided for in this rule.
(1 The importer or his agent shall furnish -
(a) a declaration
disclosing full and accurate details relating to the value of imported goods;
and
(b) any other
statement, information or document including an invoice of the manufacturer or
producer of the imported goods where the goods are imported from or through a
person other than the manufacturer or producer, as considered necessary by the
proper officer for determination of the value of imported goods under these
rules.
(2) Nothing contained in these rules shall be
construed as restricting or calling into question the right of the proper
officer of customs to satisfy himself as to the truth or accuracy of any
statement, information, document or declaration presented for valuation
purposes.
(3) The provisions of the Customs Act, 1962 (52 of
1962) relating to confiscation, penalty and prosecution shall apply to cases
where wrong declaration, information, statement or documents are furnished
under these rules.
(1) When the proper
officer has reason to doubt the truth or accuracy of the value declared in
relation to any imported goods, he may ask the importer of such goods to
furnish further information including documents or other evidence and if, after
receiving such further information, or in the absence of a response of such
importer, the proper officer still has reasonable doubt about the truth or
accuracy of the value so declared, it shall be deemed that the transaction
value of such imported goods cannot be determined under the provisions of
sub-rule (1) of rule 3.
(2) At the request of an importer, the proper
officer, shall intimate the importer in writing the grounds for doubting the
truth or accuracy of the value declared in relation to goods imported by such
importer and provide a reasonable opportunity of being heard, before taking a
final decision under sub-rule (1).
Explanation.-(1) For
the removal of doubts, it is hereby declared that:–
(i) This rule by itself does not provide a method for
determination of value, it provides a mechanism and procedure for rejection of
declared value in cases where there is reasonable doubt that the declared value
does not represent the transaction value; where the declared value is rejected,
the value shall be determined by proceeding sequentially in accordance with
rules 4 to 9.
(ii) The declared value shall be accepted where the proper
officer is satisfied about the truth and accuracy of the declared value after
the said enquiry in consultation with the importers.
(iii) The proper officer shall have the powers to raise
doubts on the truth or accuracy of the declared value based on certain reasons
which may include -
(a) the significantly
higher value at which identical or similar goods imported at or about the same
time in comparable quantities in a comparable commercial transaction were
assessed;
(b) the sale involves
an abnormal discount or abnormal reduction from the ordinary competitive price;
(c) the sale involves
special discounts limited to exclusive agents;
(d) the misdeclaration
of goods in parameters such as description, quality, quantity, country of
origin, year of manufacture or production;
(e) the non declaration
of parameters such as brand, grade, specifications that have relevance to
value;
(f) the fraudulent or
manipulated documents.
The interpretative
notes specified in the Schedule to these rules shall apply for the
interpretation of these rules.
General Note:
Use of generally
accepted accounting principles
1. “Generally accepted accounting principles”
refers to the recognized consensus or substantial authoritative support within
a country at a particular time as to which economic resources and obligations
shall be recorded as assets and liabilities, which changes in assets and
liabilities should be recorded, how the assets and liabilities and changes in
them should be measured, what information should be disclosed and how it should
be disclosed and which financial statements should be prepared. These standards
may be broad guidelines of general application as well as detailed practices
and procedures.
In rule 2(2)(v), for
the purposes of these rules, one person shall be deemed to control another when
the former is legally or operationally in a position to exercise restraint or
direction over the latter.
The price actually
paid or payable is the total payment made or to be made by the buyer to
or for the benefit of the seller for the imported goods. The payment need not
necessarily take the form of a transfer of money. Payment may be made by way of
letters of credit or negotiable instruments. Payment may be made directly or
indirectly. An example of an indirect payment would be the settlement by
the buyer, whether in whole or in part, of a debt owed by the seller.
Activities
undertaken by the buyer on his own account, other than those for which an
adjustment is provided in rule 10, are not considered to be an indirect payment
to the seller, even though they might be regarded as of benefit to the seller.
The costs of such activities shall not, therefore, be added to the price
actually paid or payable in determining the value of imported goods.
The
value of imported goods shall not include the following charges or costs,
provided that they are distinguished from the price actually paid or payable
for the imported goods:
(a) Charges for
construction, erection, assembly, maintenance or technical assistance,
undertaken after importation on imported goods such as industrial plant,
machinery or equipment;
(b) The cost of
transport after importation;
(c) Duties and taxes
in India.
The
price actually paid or payable refers to the price for the imported goods. Thus
the flow of dividends or other payments from the buyer to the seller that do
not relate to the imported goods are not part of the customs value.
Among restrictions
which would not render a price actually paid or payable unacceptable are
restrictions which do not substantially affect the value of the goods. An
example of such restrictions would be the case where a seller requires a buyer
of automobiles not to sell or exhibit them prior to a fixed date which
represents the beginning of a model year.
If the sale or price
is subject to some condition or consideration for which a value cannot be
determined with respect to the goods being valued, the transaction value shall
not be acceptable for customs purposes. Some examples of this include-
(a) The seller
establishes the price of the imported goods on condition that the buyer will
also buy other goods in specified quantities;
(b) the price of the
imported goods is dependent upon the price or prices at which the buyer of the
imported goods sells other goods to the seller of the imported goods;
(c) the price is
established on the basis of a form of payment extraneous to the imported goods,
such as where the imported goods are semifinished goods which have been
provided by the seller on condition that he will receive a specified quantity
of the finished goods.
However,
conditions or considerations relating to the production or marketing of the
imported goods shall not result in rejection of the transaction value. For
example, the fact that the buyer furnishes the seller with engineering and
plans undertaken in India shall not result in rejection of the transaction
value for the purposes of rule 3. Likewise, if the buyer undertakes on his own
account, even though by agreement with the seller, activities relating to the
marketing of the imported goods, the value of these activities is not part of
the value of imported goods nor shall such activities result in rejection of
the transaction value.
1. Rule 3(3)(a) and rule 3(3)(b) provide
different means of establishing the acceptability of a transaction value.
2. Rule 3(3)(a) provides that where the buyer and
the seller are related, the circumstances surrounding the sale shall be
examined and the transaction value shall be accepted as the value of imported
goods provided that the relationship did not influence the price. It is not
intended that there should be an examination of the circumstances in all cases
where the buyer and the seller are related. Such examination will only be
required where there are doubts about the acceptability of the price. Where the
proper officer of customs has no doubts about the acceptability of the price,
it should be accepted without requesting further information from the importer.
For example, the proper officer of customs may have previously examined the
relationship, or he may already have detailed information concerning the buyer
and the seller, and may already be satisfied from such examination or
information that the relationship did not influence the price.
3. Where the proper officer of customs is unable
to accept the transaction value without further inquiry, he should give the
importer an opportunity to supply such further detailed information as may be
necessary to enable him to examine the circumstances surrounding the sale. In
this context, the proper officer of customs should be prepared to examine
relevant aspects of the transaction, including the way in which the buyer and
seller organize their commercial relations and the way in which the price in
question was arrived at, in order to determine whether the relationship
influenced the price. Where it can be shown that the buyer and seller, although
related under the provisions of rule 2(2), buy from and sell to each other as
if they were not related, this would demonstrate that the price had not been
influenced by the relationship. As an example of this, if the price had been
settled in a manner consistent with the normal pricing practices of the
industry in question or with the way the seller settles prices for sales to
buyers who are not related to him, this would demonstrate that the price had
not been influenced by the relationship. As a further example, where it is
shown that the price is adequate to ensure recovery of all costs plus a profit
which is representative of the firm’s overall profit realized over a representative
period of time (e.g. on an annual basis) in sales of goods of the same class or
kind, this would demonstrate that the price had not been influenced.
4. Rule 3(3)(b) provides an opportunity for the
importer to demonstrate that the transaction value closely approximates to a
“test” value previously accepted by the proper officer of customs and is
therefore acceptable under the provisions of rule 3. Where a test under rule
3(3)(b) is met, it is not necessary to examine the question of influence under
rule 3(3)(a). If the proper officer of customs has already sufficient
information to be satisfied, without further detailed inquiries, that one of
the tests provided in rule 3(3)(b) has been met, there is no reason for him to
require the importer to demonstrate that the test can be met. In rule 3(3)(b)
the term “unrelated buyers” means buyers who are not related to the seller in
any particular case.
A number of factors
must be taken into consideration in determining whether one value “closely
approximates” to another value. These factors include the nature of the
imported goods, the nature of the industry itself, the season in which the
goods are imported, and whether the difference in values is commercially
significant. Since these factors may vary from case to case, it would be
impossible to apply a uniform standard such as a fixed percentage, in each
case. For example, a small difference in value in a case involving one type of
goods could be unacceptable while a large difference in a case involving
another type of goods might be acceptable in determining whether the
transaction value closely approximates to the “test” values set forth in rule
3(3)(b).
1. In applying rule 4, the proper officer of
customs shall, wherever possible, use a sale of identical goods at the same
commercial level and in substantially the same quantities as the goods being
valued. Where no such sale is found, a sale of identical goods that takes place
under any one of the following three conditions may be used:
(a) a sale at the same
commercial level but in different quantities; or
(b) a sale at a
different commercial level but in substantially the same quantities; or
(c) a sale at a
different commercial level and in different quantities.
2. Having found a sale under any one of these
three conditions adjustments will then be made, as the case may be, for :
(a) quantity factors
only;
(b) commercial level
factors only; or
(c) both commercial
level and quantity factors.
3. For the purposes of rule 4, the transaction
value of identical imported goods means a value, adjusted as provided for in
rule 4(l)(b) and (c) and rule 4(2) which has already been accepted under rule
3.
4. A condition for adjustment because of
different commercial levels or different quantities is that such adjustment,
whether it leads to an increase or a decrease in the value, be made only on the
basis of demonstrated evidence that clearly establishes the reasonableness and
accuracy of the adjustment, e.g. valid price lists containing prices referring
to different levels or different quantities. As an example of this, if the
imported goods being valued consist of a shipment of 10 units and the only
identical imported goods for which a transaction value exists involved a sale of
500 units, and it is recognised that the seller grants quantity discounts, the
required adjustment may be accomplished by resorting to the seller’s price list
and using that price applicable to a sale of 10 units. This does not require
that a sale had to have been made in quantities of 10 as long as the price list
has been established as being bona fide through sales at other quantities. In
the absence of such an objective measure, however, the determination of a value
under the provisions of rule 4 is not appropriate.
1. In applying rule 5, the proper officer of
customs shall, wherever possible, use a sale of similar goods at the same
commercial level and in substantially the same quantities as the goods being
valued. For the purpose of rule 5, the transaction value of similar imported
goods means the value of imported goods, adjusted as provided for in rule 5(2)
which has already been accepted under rule 3.
2. All other provisions contained in note to rule
4 shall mutatis mutandis also apply in respect of similar goods.
1. The term “unit/price at which goods are sold
in the greatest aggregate quantity” means the price at which the greatest
number of units is sold in sales to persons who are not related to the persons
from whom they buy such goods at the first commercial level after importation
at which such sales take place.
2. As
an example of this, goods are sold from a price list which grants favourable
unit prices for purchases made in larger quantities.
|
Sale quantity |
Unit price |
Number of sales |
Total quantity sold
at each price |
|
1-10 units |
100 |
10 sales of 5
units, |
65 |
|
11-25 units |
95 |
5 sales of 11 units
|
55 |
|
Over 25 units |
90 |
1 sale of 30 units,
|
80 |
The greatest number of units
sold at a price is 80, therefore, the unit price in the greatest aggregate
quantity is 90.
3. As another example of this, two sales occur.
In the first sale 500 units are sold at a price of 95 currency units each. In
the second sale 400 units are sold at a price of 90 currency units each. in
this example, the greatest number of units sold at a particular price is 500,
therefore, the unit price in the greatest aggregate quantity is 95.
4. A third example would be the following
situation where various quantities are sold at various prices.
|
Sale quantity |
Unit price |
|
40 units |
100 |
|
30 units |
90 |
|
15 units |
100 |
|
50 units |
95 |
|
25 units |
105 |
|
35 units |
90 |
|
5 units |
100 |
|
Total quantity |
Unit price |
|
Sold |
|
|
65 |
90 |
|
50 |
95 |
|
60 |
100 |
|
25 |
105 |
In
this example, the greatest number of units sold at a particular price is 65,
therefore, the unit price in the greatest aggregate quantity is 90.
5. Any sale in India, as described in paragraph 1
above to a person who supplies directly or indirectly free of charge or at
reduced cost for use in connection with the production and sale for export of
the imported goods any of the elements specified in rule10(l)(b), should not be
taken into account in establishing the unit price for the purposes of rule 7.
6. It should be noted that “profit and general
expenses” referred to in rule 7(1) should be taken as a whole. The figure for
the purposes of this deduction should be determined on the basis of information
supplied by or on behalf of the importer unless his figures are inconsistent
with those obtaining in sales in India, of imported goods of the same class or
kind. Where the importer’s figures are inconsistent with such figures, the
amount for profit and general expenses may be based upon relevant information
other than that supplied by or on behalf of the importer.
7. The “general expenses” include the direct and
indirect costs of marketing the goods in question.
8. Local taxes payable by reason of the sale of
the goods for which a deduction is not made under the provisions of rule
7(l)(iii) shall be deducted under the provisions of rule 7(l)(i).
9. In determining either the commissions or the
usual profits and general expenses under the provisions of rule 7(1), the
question whether certain goods are “of the same class or kind” as other goods
must be determined on a case-by-case basis by reference to the circumstances
involved. Sales in India, of the narrowest group or range of imported goods of
the same class or kind, which includes the goods being valued, for which the
necessary information can be provided, should be examined. For the purposes of
rule 7 goods of the same class or kind” includes goods imported from the same
country as the goods being valued as well as goods imported from other
countries.
10. For the purposes of rule 7(2) the “earliest
date” shall be the date by which sales of the imported goods or of identical or
similar imported, goods are made in sufficient quantity to establish the unit
price.
11. Where the method in rule 7(3) is used,
deductions made for the value added by further processing shall be based on
objective and quantifiable data relating to the cost of such work. Accepted
industry formulas, recipes, methods of construction, and other industry
practices would form the basis of the calculations.
12. It is recognized that the method of valuation
provided for in rule 7(3) would normally not be applicable when, as a result of
the further processing, the imported goods lose their identity. However there
can be instances where, although the identity of the imported goods is lost,
the value added by the processing can be determined accurately without
unreasonable difficulty. On the other hand, there can also be instances where
the imported goods maintain their identity but form such a minor element in the
goods sold in the country of importation that the use of this valuation method
would be unjustified. In view of the above, each situation of this type must be
considered on a case-by-case basis.
1. As a general rule, value of imported goods is
determined under these rules on the basis of information readily available in
India. In order to determine a computed value, however, it may be necessary to
examine the costs of producing the goods being valued and other information
which has to be obtained from outside India. Furthermore, in most cases, the
producer of the goods will be outside the jurisdiction of the proper officer.
The use of the computed value method will generally be limited to those cases
where the buyer and seller are related, and the producer is prepared to supply
to the proper officer the necessary costings and to provide facilities for any
subsequent verification which may be necessary.
2. The “cost or value” referred to in clause (a)
of rule 8 is to be determined on the basis of information relating to the
production of the goods being valued supplied by or on behalf of the producer.
It is to be based upon the commercial accounts of the producer, provided that
such accounts are consistent with the generally accepted accounting principles
applied in the country where the goods are produced.
3. The “cost or value” shall include the cost of
elements specified in clauses (1)(a)(ii) and (1)(a)(iii) of rule 10. It shall
also include the value, apportioned as appropriate under the provisions of the
relevant note to rule 10, of any element specified in rule 10(l)(b)
which has been supplied directly or indirectly by the buyer for use in
connection with the production of the imported goods. The value of the elements
specified in rule 10(l)(b)(iv) which are undertaken in India shall be included
only to the extent that such elements are charged to the producer. It is to be
understood that no cost or value of the elements referred to in this paragraph
shall be counted twice in determining the computed value.
4. The “amount for profit and general expenses”
referred to in clause (b) of rule 8 is to be determined on the basis of
information supplied by or on behalf of the producer unless the producer’s
figures are inconsistent with those usually reflected in sales of goods of the
same class or kind as the goods being valued which are made by producers in the
country of exportation for export to India.
5. It should be noted in this context that the
“amount for profit and general expenses” has to be taken as a whole. It follows
that if, in any particular case, producer’s profit figure is low and his
general expenses are high, the producer’s profit and general expenses taken
together may nevertheless be consistent with that usually reflected in sales of
goods of the same class or kind. Such a situation might occur, for example, if
a product were being launched in India and the producer accepted a nil or low profit
to offset high general expenses associated with the launch. Where the producer
can demonstrate a low profit on his sales of the imported goods because of
particular commercial circumstances, his actual profit figures should be taken
into account provided that he has valid commercial reasons to justify them and
his pricing policy reflects usual pricing policies in the branch of industry
concerned. Such a situation might occur for example, where producers have been
forced to lower prices temporarily because of an unforeseeable drop in demand,
or where they sell goods to complement a range of goods being produced in India
and accept a low profit to maintain competitivity. Where the producer’s own
figures for profit and general expenses are not consistent with those usually
reflected in sales of goods of the same class or kind as the goods being valued
which are made by producers in the country of exportation for export to India,
the amount for profit and general expenses may be based upon relevant information
other than that supplied by or on behalf of the producer of the goods.
6. The “general expenses” referred to in clause
(b) of rule 8 covers the direct and indirect costs of producing and selling the
goods for export which are not included under clause (a) of rule 8.
7. Whether certain goods are “of the same class
or kind” as other goods must be determined on a case-by-case basis with
reference to the circumstances involved. In determining the usual profits and
general expenses under the provisions of rule 8, sales for export to India of
the narrowest group or range of goods, which includes the goods being valued,
for which the necessary information can be provided, should be examined. For
the purposes of rule 8 “goods of the same class or kind” must be from the same
country as the goods being valued.
1. Value of imported goods determined under the
provisions of rule 9 should to the greatest extent possible, be based on
previously determined customs values.
2. The methods of valuation to be employed under
rule 9 may be those laid down in rules 3 to 8, inclusive, but a reasonable
flexibility in the application of such methods would be in conformity with the
aims and provisions of rule 9.
3. Some examples of reasonable flexibility are as
follows:
(a) Identical goods. - The requirement that
the identical goods should be imported at or about the same time as the goods
being valued could be flexibly interpreted; identical imported goods produced
in a country other than the country of exportation of the goods being valued
could be the basis for customs valuation; customs values of identical imported
goods already determined under the provisions of rules 7 and 8 could be used.
(b) Similar goods. - The requirement that the
similar goods should be imported at or about the same time as the goods being
valued could be flexibly interpreted; similar imported goods produced in a
country other than the country of exportation of the goods being valued could
be the basis for customs valuation; customs values of similar imported goods
already determined under the provisions of rules 7 and 8 could be used.
(c) Deductive method. - The
requirement that the goods shall have been sold in the “condition as imported”
in rule 7(1) could be flexibly interpreted; the ninety days requirement could
be administered flexibly.
In rule 10(l)(a)(i),
the term “buying commissions” means fees paid by an importer to his agent for
the service of representing him abroad in the purchase of the goods being
valued.
1. There are two factors involved in the
apportionment of the elements specified in rule 10(l)(b)(ii) to the imported
goods - the value of the element itself and the way in which that value is to
be apportioned to the imported goods. The apportionment of these elements
should be made in a reasonable manner appropriate to the circumstances and in
accordance with generally accepted accounting principles.
2. Concerning the value of the element, if the
importer acquires the element from a seller not related to him at a given cost,
the value of the element is that cost. If the element was produced by the
importer or by a person related to him, its value would be the cost of
producing it. If the element had been previously used by the importer,
regardless of whether it had been acquired or produced by such importer, the
original cost of acquisition or production would have to be adjusted downward
to reflect its use in order to arrive at the value of the element.
3. Once a value has been determined for the
element it is necessary to apportion that value to the imported goods. Various
possibilities exist. For example, the value might be apportioned to the first
shipment if the importer wishes to pay duty on the entire value at one time. As
another example, the importer may request that the value be apportioned over
the number of units produced up to the time of the first shipment. As a further
example, he may request that the value be apportioned over the entire
anticipated production where contracts or firm commitments exist for that
production. The method of apportionment used will depend upon the documentation
provided by the importer.
4. As an illustration of the above, an importer
provides the producer with a mould to be used in the production of the imported
goods and contracts with him to buy 10000 units. By the time of arrival of the
first shipment of 1000 units, the producer has already produced 4,000 units.
The importer may request the proper officer of customs to apportion the value of
the mould over 1,000 units, 4,000 units or 10,000 units.
1. Additions for the elements specified in rule
10(l)(b)(iv) should be based on objective and quantifiable data. In order to
minimise the burden for both the importer and proper officer of customs in
determining the values to be added, data readily available in the buyer’s
commercial record system should be used in so far as possible.
2. For those elements supplied by the buyer which
were purchased or leased by the buyer, the addition would be the cost of the
purchase or the lease. No addition shall be made for those elements available
in the public domain, other than the cost of obtaining copies of them.
3. The case with which it may be possible to
calculate the values to be added will depend on a particular firm’s structure
and management practice, as well as its accounting methods.
4. For example, it is possible that a firm which
imports a variety of products from several countries maintains the records of
its design centre outside the country of importation in such a way as to show
accurately the costs attributable to a given product. In such cases, a direct
adjustment may appropriately be made under the provisions of rule 10.
5. In another case, a firm may carry the cost of
the design centre outside the country of importation as a general overhead
expense without allocation to specific products. In this instance, an
appropriate adjustment could be made under the provisions of rule 10 with
respect to the imported goods by apportioning total design centre costs over
total production benefiting from the design centre and adding such apportioned
cost on a unit basis to imports.
6. Variations in the above circumstances will, of
course, require different factors to be considered in determining the proper
method of allocation.
7. In cases where the production of the element
in question involves a number of countries and over a period of time, the
adjustment should be limited to the value actually added to that element
outside the country of importation.
1. The royalties and licence fees referred to in
rule 10(l)(c) may include among other things, payments in respect to patents,
trademarks and copyrights. However, the charges for the right to reproduce the
imported goods in the country of importation shall not be added to the price
actually paid or payable for the imported goods in determining the customs
value.
2. Payments made by the buyer for the right to
distribute or resell the imported goods shall not be added to the price
actually paid or payable for the imported goods if such payments are not a
condition of the sale for export to the country of importation of the imported
goods.
Where objective and
quantifiable data do not exist with regard to the additions required to be made
under the provisions of rule 10, the transaction value cannot be determined
under the provisions of rule 3. As an illustration of this, a royalty is paid on
the basis of the price in a sale in the importing country of a litre of a
particular product that was imported by the kilogram and made up into a
solution after importation. If the royalty is based partially on the imported
goods and partially on other factors, which have nothing to do with the
imported goods (such as when the imported goods are mixed with domestic
ingredients and are no longer separately identifiable, or when the royalty
cannot be distinguished from special financial arrangements between the buyer
and the seller), it would be inappropriate to attempt to make an addition for
the royalty. However, if the amount of this royalty is based only on the
imported goods and can be readily quantified, an addition to the price actually
paid or payable can be made.
[F.No.459/35/2007-Cus.V]